Steel prices have been heading north since October last year. However, SteelMint’s data, tracking since May ’20, show that except for the months of May and June ’20, hot rolled coil (HRC) prices have continued to remain higher than those of rebar till May ’21. More importantly, the spread hit a record high of INR 11,000 per tonne (t) in May ’21, based on average monthly price calculations.
In May and June ’20, average monthly prices of the blast route rebar of 12-32 mm were higher, by INR 1,130/tonne (t) and INR 1,100/t respectively compared to that of HRCs of 2.5-8mm, ex-Mumbai.
The spread was somewhat volatile since May ’20 till Dec ’21, with the monthly difference ranging from INR 1,130/t in May ’20 to a mere INR 125/tonne in Dec ’21, climbing midway to INR 4000 in Oct ’21.
However, it started widening sharply from Jan ’21 when the average monthly price of the benchmark HRC was at INR 56,900/t against the rebar’s INR 54,430/t with the gap at INR 2,480/t. This expanded to INR 4,230/t in Feb ’21, when the average monthly HRC prices were at INR 54,400/t against the rebar’s INR 50,180/t. Mar ’20 saw the average monthly rebar prices dip to INR 49,380/t against the HRCs’ INR 54,500/t, the gap enlarging by INR 5,130/t. In Apr ’21, the HRC prices rested at INR 62,500/t against the rebar’s more modest INR 53,280/t with the spread furthering by a chunky INR 9,230/t. In May ’21, HRC prices touched an elevated INR 66,000/t compared to the rebar’s more sedate INR 55,000/t, with a yawning and record price gap of INR 11,000/t between both.
The last time the spread had widened by a record high was by INR 4,000/t in the first week of Oct ’20 when HRC prices, ex-Mumbai, had shot up to INR 42,000-43,500/t against the BF-grade rebar’s more moderate INR 38,900-39,500/t. However, since Mar ’21, the average price spread is on a steep incline, breaking all previous records up to May ’21.
This draws SteelMint’s attention to the fact that longs have not been performing as well as flats especially since Feb ’21.
Why is longs market subdued?
- Construction activities in India are mostly stalled at present because of the lockdown across states. A sizeable portion of construction labour has returned home.
- With the approaching monsoon, construction work level will remain low. Therefore, demand for longs will also stay subdued over Jun-Sept ’21.
- With the government order lifting restrictions on rebar supplies by secondary mills for government projects, the price dynamics have altered slightly. As per the notification, the induction mills can supply to projects, provided they conform to mandatory BIS standards as per successive Steel Quality Control Orders. But, in a spin-off, larger mills have not been able to increase their prices too much in order to stay in competition with the IFs.
Flats head north
- Globally, demand for flats is high with lockdowns having eased across Europe. The emphasis is on construction to kick-start economies. Demand for automobiles is high with an accent on personal vehicles in countries that once encouraged public transport. Both factors are fuelling import demand for HRCs and CRCs.
- Currently, China is offering HRCs at $1,030-1,040/t CFR and the Japanese mills, at $1,100/t CFR. Average monthly export prices from India to Vietnam have more than doubled from $435/t CNF in Jun ’20 to $1,060/t CNF in May (up to 17 May ’21).
- There is a gap of 15-20% between the domestic and overseas prices despite a sharp fall in Chinese export offers on the back of volatile futures. On the other hand, Mumbai region trade prices of HRCs are hovering around INR 65,000-66,000/t. Prices do not include GST @18%.
- To reduce the gap with export prices, Indian mills are mulling further price hikes in HRCs and CRCs by around INR 2,000-3,000/tonne ($27-41/t). In May ’21 alone, a few major steel mills lifted prices twice.
Outlook
With further hikes expected in HRC prices, the spread between rebars may only widen further. Mills may not have too much of bandwidth to raise domestic longs prices with the monsoons round the corner even if lockdowns ease across states.
~Madhumita Mookerji
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